Presented by Michael Brustein, Esq.
NACTEI PRE-CONFERENCEPHOENIX, AZMAY 6, 2013
FLYING UNDER THE RADAR:
MEASURING COMPLIANCE WITH
FEDERAL RULES
1. Update on Perkins Funding2. Perkins Reauthorization Status3. WIA Reauthorization Status4. Navigating the Legal Authorities5. New OCFO Guidance on Time and Effort6. Proposed Super Circular
AGENDA
1. Perkins Q & A2. OCFO Guidance3. Perkins Statute4. Federal Education Audit Resolution - Key
Events Timeline
APPENDICES
4
FY 13 (7/1/12 – 6/30/13)$1,123,030,274
FY 14 (7/1/13 – 6/30/14)$1,066,878,760
FY 15 (7/1/14 – 6/30/15) $?
(1) CTE FUNDING
5
1. The 1/2/13 trigger date deferred by ED to 7/1/13
2. Congress delayed effective date from 1/2/13 to 3/1/13
3. Delay reduced uniform cut from 8% to 5%
4. OMB increased cut from 5.0% to 5.2%
SEQUESTRATION
6
No State to receive less than base amount received in 1998
Payments to all states shall be ratably reduced
PERKINS HOLD HARMLESS – SECTION 111(a)(5)
7
Depending on population growth since 1998, some states witnessing disproportionate reductions
OVAE INTERPRETATION
8
OVAE estimates do not reflect bifurcation of Perkins findings
25% - 7/1/1375% 10/1/13
9
Because ED deferred March 1, 2013 cut 5.2% deducted from 7/1/13 25% amount
10
There will be a second cut on October 1, 2013, because 75% award is based on next year’s appropriation
11
What will amount be of second cut?Not uniformIn range of 8%
12
Released two months late on 4/10/13
ED would get $71.2 billion increase of 4.6% over 2012 (not 2013)
IDEA / Title I FlatFocus on Competitive Grants (RTT) and Pre-K
OBAMA 2014 BUDGET
13
(2) PERKINS V REAUTHORIZATION
Perkins IV authorized from 7/1/06 through June 30, 2012
Congress will continue to fund Perkins until reauthorized (GEPA)
14
WILL PERKINS BE REAUTHORIZED IN 2013?
1. ESEA2. IDEA3. AEFLA4. WIA
15
OBAMA ADMINISTRATION ISSUED “BLUEPRINT”
Alignment Allow states to identify in demand occupations in high growth industry sectors
16
Collaboration Consortia funding to ensure collaboration, with private sector match
17
Accountability Move from formula funding to competitive funding
Common definition
Incentives for high performance
18
Innovation A competitive innovation and transformation fund
19
NASDTEC Base funding on POS
20
(3) STATUS OF WIA REAUTHORIZATION
21
113TH CONGRESS WIA PROPOSAL
Supporting Knowledge and Investing in Lifelong Skills (SKILLS) Act (H.R. 803)
Sponsor: Representative Virginia Foxx (R-NC)
Introduced February 25, 2013House Education and the Workforce’s
Subcommittee on Higher Education and Workforce Training hearing February 26, 2013
Bill markup on March 6, 2013 and passed on a party-line vote
22
CONSOLIDATION OF PROGRAMS
Proposed elimination of “duplicative” and “ineffective” workforce programs
35 programs would be consolidatedProvides authority to Governors to consolidate additional workforce programs
Consolidated programs would be part of a single funding stream called the Workforce Investment Fund (WIF)
23
WORKFORCE INVESTMENT FUND (WIF)
WIF is a unified and flexible funding source for employers, workers, and job seekers
Larger focus on Workforce Investment Boards (WIBs)2/3 of local WIBs must be businessesEliminates the requirement that unions be represented on WIBs
24
COMMUNITY COLLEGES ROLE
State agency offi cials may designate CEOs of community colleges to serve on Workforce Investment Boards (WIBs)
Community colleges may serve on local WIBs
Eligible agencies for administering workforce activities includes community and technical colleges
State Unified Plan should include consultations with community and technical colleges
25
(4) NAVIGATING THE LEGAL AUTHORITIES FOR THE ALLOWABLE USES OF PERKINS FUNDS
1.Perkins Act2.EDGAR3.OMB Circulars
26
PERKINS ACT
1. Serve only CTE students2. Meet the Local Plan requirements
on Section 134 (Budgets)3. Satisfy the Section 135
requirements on uses of funds4. Accountability – Section 1135. Local Improvement Plans –
Section 123
27
SECTION 135
a) Improveb)Mandatory usesc) Permissive usesd)Administrative costs
28
EDGAR
Part 76 – State Administrative Rules
Part 80 – General Administrative Rules
29
OMB CIRCULARS
A-87 / A-21 Cost PrinciplesA-133 Audit Principles
30
EDGAR PART 80
1. Standards for Financial Management
2. Payments3. Allowable Costs4. Period of Availability of Funds5. Program Income6. Non Federal Audit
31
EDGAR PART 80 (CONT.)
7. Changes8. Equipment9. Supplies10.Procurement11.Monitoring12.Retention of Records
32
A-87 / 21 COST PRINCIPLES
In developing your Perkins Budget, follow this roadmap:1) Is the item allowable under
a) Perkinsb) State Planc) State / Local Policiesd) A-87 Appendix B (43 items)
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2) Is the item necessary?
34
3)Is the item reasonable?
35
4) Is the cost allocable to Perkins?
36
5) Is the cost adequately documented?
OMB CIRCULARS TIME AND EFFORT RULE
Compensation for Personnel Services: If federal funds used for salaries, then time
distribution records are required.
Must demonstrate - If employee paid with federal funds, then employee worked on that specific federal program/cost objective.
37
WHO MUST PARTICIPATE?
Any employee who is working on a federal program◦ Not contractors◦ All employees paid
with federal funds◦ Some employees
paid with non-federal funds
38
NEW TIME AND EFFORT GUIDANCE
BY OCFO!!http://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.html
39
A-87: IF EMPLOYEE WORKS 100% ON SINGLE COST OBJECTIVE
Semi-Annual Certification Completed at least every six months Signed by a supervisor with
knowledge or the employee After-the-fact record (dated) Accounts for the total activity for
which employee compensated Must coincide with one or more pay
periods
40
A-87: IF EMPLOYEE WORKS 100% ON SINGLE COST OBJECTIVE
Semi-Annual Certification
“This is to certify that Michael Brustein has worked 100% of his time for the period July 1, 2012, through December 31, 2012, on Perkins Administration.”
Signature of employee: /s/Date: January 5, 2013
41
A-87: IF EMPLOYEE WORKS ON MULTIPLE COST OBJECTIVES
Personnel Activity Reports After-the-fact record (dated) Accounts for the total activity for which
employee compensated At least monthly
(unless substitute system) Signed by the employee Must coincide with one or more pay
periods42
A-87: PARS
Personnel Activity Reports (PAR)
“For the month of December 2012, I, Michael Brustein, spent my time 50% on the Perkins Basic Grant and 50% on Perkins Administration.”
Signature of Employee: /s/Date: January 1, 2013
43
OCFO: “The criteria for whether an employee may document time and effort
using a semiannual certification or must fill out
a monthly PAR can be confusing.”
44
WHAT IS A SINGLE COST OBJECTIVE???
WHAT IS A “COST OBJECTIVE”?
A-87 Definition: A function, organizational subdivision, contract, grant or other cost activity for which cost data are needed and for which costs are incurred.
45
MULTIPLE ACTIVITIES OR COST OBJECTIVES FOR WHICH A PAR IS REQUIRED — THAT IS,
IF AN EMPLOYEE WORKS ON
More than one Federal award.A Federal award and a non-Federal
award.An indirect cost activity and a direct
cost activity.Two or more indirect activities that are
allocated using different allocation bases.
An unallowable activity and a direct or indirect cost activity.
46
OCFO GUIDANCE
It is possible for multiple programs to have the same cost objective, which creates confusion over whether the presence of a single cost objective or being funded by multiple programs should determine what time-and-effort documentation an employee must complete.
47
OCFO GUIDANCE (CONT.)
It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award.
The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non-Federal funds.
48
OCFO GUIDANCE EXAMPLES OF SINGLE COST OBJECTIVES:
State leadership funds under the Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV) and State funds
A State curriculum specialist who develops new career and technical education courses and initiatives is funded 50 percent with Perkins IV funds reserved under section 112(a)(2) for State leadership and 50 percent with State general funds.
Career and technical education curriculum development is a single cost objective because it can be fully supported with State leadership funds under Perkins IV.
Only a semiannual certification, therefore, is required even though the employee’s salary is supported by a Federal award and State funds. 49
SUBSTITUTE SYSTEMS AND OCFO
CHANGES
50
SUBSTITUTE SYSTEMS GENERALLY
OMB Circular A-87 authorizes the use of substitute systems for allocating salaries and wages.
ED must approve SEA’s system. Can include:
Random moment samplingCase countsOther quantifiable measures of employee effort
51
SUBSTITUTE SYSTEMS CHANGES
An SEA would be permitted to allow an LEA to use alternative documentation through approved substitute system.
For example, could use a teacher's course schedule (instead of PARs) for an individual who works on multiple activities or cost objectives but does so on a predetermined schedule.
An individual documenting time and effort under the substitute system would be permitted to certify time and effort on a semiannual basis, provided certain requirements are met.
52
SUBSTITUTE SYSTEMS CHANGES (CONT.)
The SEA must obtain from the LEA a management certification certifying that:Only eligible employees will participate
Sufficient controls are in place to ensure that the schedules are accurate
The certification must disclose any known deficiencies with the system or known challenges with implementing the substitute system.
53
NEW SUBSTITUTE SYSTEMS REQUIREMENTS
(1) System GuidelinesTo be eligible to document time and effort
under the substitute system, employees must –Currently work on a schedule that includes multiple activities or cost objectives that must be supported by monthly personnel activity reports;
Work on specific activities or cost objectives based on a predetermined schedule; and
Not work on multiple activities or cost objectives at the exact same time on their schedule.
54
NEW SUBSTITUTE SYSTEMS REQUIREMENTS (CONT.)
(2) In lieu of PARs, eligible employees may support a distribution of their salaries and wages through documentation of an established work schedule that meets the standards under section (3).
An acceptable work schedule may be in a style and format already used by an LEA.
55
NEW SUBSTITUTE SYSTEMS REQUIREMENTS (CONT.)
(3) Each Employee’s work schedule must:Indicate the cost objective(s) that the employee worked on;
Account for the total hours compensated; and
Be certified:At least semiannually; and Signed by the employee and a supervisory official having firsthand knowledge of the work performed by the employee.
56
NEW SUBSTITUTE SYSTEMS REQUIREMENTS (CONT.)
(4) Any revisions to an employee’s established schedule that continue for a prolonged period must be documented and certified.
The effective dates of any changes must be clearly indicated in the documentation provided.
57
NEW SUBSTITUTE SYSTEMS REQUIREMENTS (CONT.)
(5) PARs must be used when there is a significant deviation.
States should put forth guidelines and examples for what constitutes a significant deviation from an employee’s established schedule that would warrant an individual reverting to a personnel activity report.
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59
(6) PROPOSED SUPER CIRCULAR
WHY “SUPERCIRCULAR”???
1. Greater simplicity2. Greater consistency3. Obama Executive Order on
Regulatory Review
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• Greater “simplicity” means elimination of several compliance elements in the Compliance Supplement
• 14 requirements reduced to 7, eliminating:
1. Equipment Management2. MOE/Ear-Marking3. Procurement4. Program Income 61
The elimination of the compliance requirements from A-133 will place the burden on “Pass-Through” agencies
62
KEY REQUIREMENTS RETAINED
• Allowable Costs• Eligibility• Cash Management• Reporting• Subrecipient Monitoring
63
WHAT IS COVERED?
1. Administrative Requirements (A-102, A-110)
2. Cost Principles (A-87, A-21, A-122)
3. Audit Requirements (A-133)
64
WHO IS COVERED?
All non-federal entities expending federal awards
65
WHEN IS IT EFFECTIVE?
NPRM – 2/1/13Close of comment period 06/02/13Analysis of public commentFinal regulation (2 CFR) – not likely before 1/1/14
EDGAR revisions – within one year of final regulation ?
Effective date of 7/1/14 is doubtful66
MIGHT EDGAR BE INCONSISTENT WITH SUPERCIRCULAR?
Yes, but federal agencies applying more restrictive requirements need OMB approval
67Section _.108
Agencies can request special tests for A-133 items removed (e.g., equipment management, period of availability of funds)
68
IF PROGRAM STATUTE DIFFERS FROM
SUPERCIRCULAR, STATUTE GOVERNS
69Section _.106
SO WHAT IS NEW?
70
FEDERAL AGENCIES MUST EVALUATE RISKS TO THE PROGRAM POSED BY EACH
APPLICANTFOCUS NOW ON RISK!
a) Financial stabilityb) Management systemc) History of performanced) Generally available informatione) Single auditsf) Capacity to implement programs
71Section _.205
FOLLOWING RISK ANALYSIS, AGENCIES MAY IMPOSE CONDITIONS
ON GRANTEE
72Section _.205
PERFORMANCE EXPECTATIONS
Agencies must include in the award indication of timing and scope of expected performance – as related to outcomes intended to be achieved by the program
73Section _.404
PASS-THROUGH AGENCY MAY IMPOSE “SUPPLEMENTAL
REQUIREMENTS”
74Section _.501(c)(4)
PASS-THROUGH MONITORING SHALL INCLUDE:
a)Analyzing financial and programmatic reports
b)Ensure subrecipients take timely and appropriate corrective action
c) Issue management decision on A-133 finding at subgrantee level
75Section _.501(c)(5)
MONITORING TOOLS OF PASS-THROUGH
a)On-site reviewsb)Provide training and technical
assistancec) Arrange for “Agreed Upon
Procedures”
76Section _.501(c)(5)
RISK FACTORS FOR PASS-THROUGH MONITORING
a)Results of previous auditsb)New subrecipientsc) New personnel or
substantially changed systemd)Extent of federal monitoring
77Section _.501(c)(6)
CASH MANAGEMENT
Recipients shall maintain advances of federal funds in interest bearing accounts unless…
a)Recipient receives less than $120,000 in federal $ per year
b)Interest will not exceed $500c)Bank requires minimum
balance
78Section _.502(e)(3)(k)
INVENTORY MANAGEMENT
Equipment definition samea)Acquisition cost of $5,000b)Useful life greater than one
year
79Section _.503(d)
INVENTORY MANAGEMENT
Use/Management/DispositionSame as EDGAR 80.32
80Section _.503(d)
“COSTS OF COMPUTING DEVICES” = “SUPPLIES”
But When no longer needed for any other
federally sponsored project, recipient maya) Retain themb) Sell them
But compensate federal government if per unit value exceeds $5000
But Conflicts with C-31(6) total aggregate
value of $5000 (unused)81Section _.503(e) and Section
_ .620
COST SHIFTING
Grantee cannot shift cost from one award to another to overcome shortfall, unless costs are allowable under both awards
82Section _.607(c)
COST ALLOCATION – COST SHARING
If a cost benefits two or more projects in a proportion that can be easily determined, then cost should be allocated on the proportional benefit
83Section _.607(d)
COST ALLOCATION – COST SHARING
If proportion cannot be easily determined then allocate on any reasonable documented basis
84Section _.607(d)
SET-ASIDES
If program statute contains reserves or limitations, amount not used cannot be charged to other federal awards
85Section _.611
ADMINISTRATIVE COSTS – DIRECT CHARGING OF ADMINISTRATIVE COSTS
Salaries of administrative and clerical staff should be treated as indirect, unless
a) Services are integral to project, andb) Individuals can be specifically
identified, andc) Costs are explicitly set out in
budget, and d) Costs not recovered as indirect
86Section _.615(d)
INDIRECT COSTS
A federally approved negotiated rate shall be accepted by all federal agencies
87Section _.616(c)(1)
INDIRECT COSTS
Pass-through entities must abide by the federally recognized indirect cost rate negotiated between the federal agency and subrecipient
(restricted vs. nonrestricted)
88Section _.501(c)(1)(D)
INDIRECT COSTS
But if no such rate exists, the pass-through must negotiate the rate, or a de minimis indirect cost rate equal to 10% of total modified direct costs to small entities. (But what about restricted rates? Most LEAs have restricted rates in single digits.) 89Section _.616(e)
TIME AND EFFORT MANAGEMENT
Eliminate reference to PARsNow “Certified Reports”Reports may be electronicSemi-Annual for single cost objective - same
90Section _.621 C-10(9)
TIME AND EFFORT MANAGEMENT
After the fact, unless mutually satisfactory alternative approved by awarding agency
Certification periods cannot exceed 12 months
Activities may be expressed as percentages
91Section _.621 C-10(9)
TIME AND EFFORT MANAGEMENT
Certified Reports on 2 or more cost objectives certified by employee or individual responsible for verification
92Section _.621 C-10(9)
TIME AND EFFORT MANAGEMENT
No additional support other than certification is necessary
93Section _.621 C-10(9)
TIME AND EFFORT MANAGEMENT
Substitute systems may be used if approved by cognizant agency
Federal agencies are encouraged to approve alternative proposals based on outcomes
94Section _.621 C-10(9)(F)
TIME AND EFFORT MANAGEMENT
Awarding agencies may approve “blended funding” where multiple programs involved, and “performance-oriented metrics” are used
95Section _.621 C-10(9)(F)
COST PRINCIPLES CHANGES
Costs for services of counsel (in-house or Bruman) for administrative proceedings (OALJ) may not be charged if the ALJ imposes a “monetary penalty.” Legal expenses are allowable if the proceeding is resolved by consent or compromise. 96Section _.621 C-
14(2)
COST PRINCIPLES CHANGES
Cost of MeetingsCosts from meetings and conferences “beyond the recipient entity” are allowable
97Section _.621 C-32
COST PRINCIPLES CHANGES
Travel CostsGrantee must retain documentation
a)Participation of individual is necessary to the federal award
b)Costs are reasonable and consistent with entity’s established travel policy 98Section _.621 C-
53(2)
COST PRINCIPLES CHANGES
TravelIf no institutional travel policy, GSA rates apply
- 48 CFR 31.205-46(a)
99Section _.621 C-53(2)(C)
SINGLE AUDITS
Single Audit threshold is raised from $500,000 in federal annual expenditures to $750,000
100Section _.701(a)
AUDIT FOLLOW-UP
Federal awarding agencies shall use “cooperative audit resolution mechanisms” to improve federal program outcomes through better audit resolution, follow-up and corrective action
101Section _.713(c)(5)
COOPERATIVE AUDIT RESOLUTION
Improve communication, foster collaboration, promote trust, and develop understanding between auditor and auditee
102Appendix I - Definitions
COOPERATIVE AUDIT RESOLUTION
This approach is based upon “Federal agencies offering appropriate amnesty for past noncompliance when audits show prompt corrective action”
103Appendix I - Definitions
AGENCY DETERMINATION LETTERS
The federal agency or pass-through entity may request additional information from auditee as a way of mitigating disallowed costs
104Section _.714(a)
TIME REQUIREMENTS
The federal agency or pass-through shall make the determination within six months of the acceptance of the audit report
105Section _.714(d)
AUDIT FINDINGS
Revises definition of “major program” to focus audits on material issuesThe auditor shall report known questioned costs greater than $25,000 for major programs
If not a major program (auditor normally will not find questioned costs) but if auditor becomes aware of questioned costs greater than $25,000 for non-major programs – must report
106Section _.714(a)
QUESTIONS?
107
Disclaimer
This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the
presentation or later review of these printed materials does not create an
attorney-client relationship with Brustein & Manasevit, PLLC. You should not take
any action based upon any information in this presentation without first consulting legal counsel familiar with your particular
circumstances.108